Glossary
Plain-English definitions for the Tao-of-Trading framework, the zones the bot uses to grade every setup, and the indicators behind the charts. Hop in from any tooltip across the site — anchor links work on every term.
Framework
Tao of Trading
#The mental model the bot uses to grade every setup. Price is a river: it wants to flow with the trend (the EMA21) but constantly stretches and snaps back. The job isn't to predict the river — it's to recognize where in the cycle you are right now and play the highest-edge part of that cycle.
How far price has stretched from its EMA21, measured in ATR units (volatility-normalized). Positive = price is above EMA21, negative = below.
- • 0.0σ — price is the EMA21.
- • ±1.0σ — one volatility-day's stretch. Normal trend behavior.
- • ±2.0σ — extended. Snap-back odds rising.
- • ±3.0σ+ — blow-off / deep-pull territory. Mean reversion is the higher-probability bet.
The five Tao zones
Every ticker, every cycle, the bot tags one of these five zones based on river_distance_atr. The bell alerts you when something flips into BLOW-OFF or DEEP-PULL.
Price is 3+ ATRs above EMA21. Trend is parabolic and unsustainable. Mean-reversion shorts are the highest-edge trade; chasing longs here is how accounts get ruined.
Healthy uptrend, but extended. Hold existing longs, but new long entries should wait for a pullback. The river still flows up, just too fast to climb on right now.
Price is hugging the EMA21. This is where new positions enter — both longs (on bullish setups) and shorts (on bearish setups). The bot grades A/B/C only on river-zone setups.
Healthy downtrend, but extended. Hold existing shorts, but new short entries should wait for a bounce. Mirror image of STRETCHED.
Price is 3+ ATRs below EMA21. Capitulation-style flush — mean-reversion longs are the highest-edge trade. Catching the falling knife only works here, never sooner.
Keltner bands
21-day exponential moving average. This is the centerline of the Keltner channel and the "river" in Tao language — trend direction comes from its slope, and most healthy setups happen near it.
The average daily price range over the last 14 days. Used as a volatility yardstick: a "1σ move" for AAPL might be $2, for NVDA $6 — ATR puts them on the same scale so we can grade them apples-to-apples.
A volatility envelope drawn at fixed ATR multiples above and below EMA21. The site plots four bands:
- • +1σ / −0.5σ — inner channel (the "fair value" zone).
- • +2σ / −2σ — outer channel (entry of the extreme zones).
Read these together: price riding the outer upper band = STRETCHED → BLOW-OFF. Price piercing the outer lower band = PULLBACK → DEEP-PULL.
Grades
Every IN-THE-RIVER setup gets a letter grade based on confluence: trend alignment, R-multiple, probability, and how many independent signals point the same way.
Best-of-the-day. Multi-signal confluence, ≥3R potential, ≥65% probability. These are rare — usually 0–2 per scan.
Strong setup. Clean trend, healthy R, multiple agreeing signals. Bot pushes these to Discord intraday.
Decent setup. Worth tracking, but expect more chop. Size down or wait for confirmation.
Speculative. The geometry exists, but confluence is thin. Educational mostly — not a "back up the truck" trade.
Market regime
Regime
#The character of the overall tape, judged from SPY + QQQ + IWM together. Affects which side of the book the bot tilts toward.
- • RISK-ON — indices stretched up, trending healthy. Longs favored.
- • NEUTRAL — chop, mixed signals. Both sides in play.
- • RISK-OFF — indices stretched down or breaking. Shorts favored.
Confluence
#The number of independent technical signals pointing the same direction at the same time (trend, momentum, volume, candle structure, support/resistance). More confluence = higher grade.
Other terms you'll see
How many units of risk the target is worth. A "2R" setup means if you're risking $100 to the stop, the target pays $200. The bot only grades A/B setups at ≥1.5R.
Probability %
#The Matrix model's estimated chance the target is reached before the stop, based on historical analogs with the same zone, regime, and confluence pattern.
Placement
#Whether you'd enter at market, on a pullback, or on a breakout. The bot picks the entry style that gives the best risk-adjusted fill for the current zone.
Setup type
#The technical pattern triggering the trade — trend continuation, mean-reversion, range break, pullback-buy, etc.
OTM (out-of-the-money)
#For options: a call whose strike is above the current stock price (or a put whose strike is below). The site defaults to 5% OTM as a sensible starting point, matching the user's stated preference.
Missing a term? Ask Matrix — the chat will explain in plain English with examples from real tickers.